By Jim Woods

After the closing bell on Tuesday, Oct. 27, water infrastructure firm Insituform (INSU) posted third-quarter earnings of 30 cents per diluted share. The bottom-line number was in step with consensus Street estimates, and shares jumped on the news in both the after-hours trading session and again in Wednesday morning trade. The company said income from continuing operations was $11.8 million, a 51% increase from the third quarter a year ago.

In my opinion, the real good news in this report was the company’s contract backlog, which increased to another record high of $467.7 million relating to growth in the company’s Asia-Pacific Sewer Rehabilitation and Energy and Mining segment. This growth is likely to result in a strong fourth quarter performance for Insituform. The company said as much, as it expects Q4 earnings to come in between 40 to 42 cents per diluted share. If the company meets is Q4 forecast, it will have met its full-year earnings guidance of $1.02 to $1.04 per diluted share.

While I am pleased to see Insituform forecast a solid fourth quarter, the numbers didn’t really come as a big surprise to me. The ChangeWave Alliance Research Network gave us an indication of good news for Insituform several months ago.

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According to a July 2009 survey of professionals who work in the water industry, there’s going to be a decided rebound in water project spending over the next 12 months, due largely to the U.S. government’s economic stimulus program. The survey found that water infrastructure repair and replacement—Insituform’s bread and butter—remains the top water industry sector, with 71% of industry respondents saying it will attract the most spending over the next two years.

The survey found that better than two-thirds of respondents (68%) report spending on water projects will increase over the next 12 months. That number is double ChangeWave’s previous survey in October 2008. At the country level, 43% of respondents project the U.S. will experience the biggest increase in spending over the next 12 months – surpassing even China, which came in at 38%.

The reason for the surge in U.S. water spending is due to government stimulus spending, which includes an estimated $6 billion allocated to water projects. When asked what impact the U.S. stimulus program will have over the next year, 30% of respondents said it will cause a “significant increase” in water project spending.

I think what we can infer here is that water infrastructure spending is on its way up, and that ramp-up in water spending is going to last for some time. This translates into great news for Insituform.

If you want to take advantage of the coming water infrastructure build out wave, then I think it’s time to take a drink of water with INSU shares.

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